Abolish mortgage taxes or pay price

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Federal Treasurer Peter Costello will demand the states use
their GST windfall to cut up to $15 billion in taxes for home
buyers, small business and consumers.

Revealing his plans, Mr Costello accused the states of
"hoarding" the GST instead of keeping a 1999 promise to abolish
inefficient state taxes and provide increased services.

The Federal Government could withhold billions in GST funds from
NSW if Premier Bob Carr refuses to meet its reform demands. One of
the taxes Mr Costello wants scrapped is the stamp duty on
mortgages, which is worth almost $2000 on a Sydney home loan of
$500,000.

The proposal follows the Reserve Bank's decision to increase
interest rates for the first time since December 2003, pushing up
monthly mortgage repayments by about $16 for every $100,000
borrowed.

Mr Costello's new push will further inflame last week's row with
the states about how they spend the GST money and sets the scene
for a fiery meeting of the nation's

treasurers to discuss the issue in Canberra on March 23 - the
first for NSW Treasurer Andrew Refshauge.

Mr Costello said he would insist at the meeting that the states
implement GST-related tax cuts by abolishing or reducing six stamp
duties, including those on mortgages, bonds and debentures as well
as lease and rent arrangements.

The Federal Government says NSW will be $196 million better off
because of GST this financial year and will get a windfall of $1.46
billion by 2007-08.

As part of the introduction of the GST, NSW has already scrapped
bed taxes, financial institutions duty, the bank account debit tax
and stamp duty on marketable securities.

The GST Intergovernmental Agreement, which gives the states all
GST revenue, says they agree to eliminate "a number of existing
inefficient taxes which are impeding economic activity".

The agreement calls for Canberra and the states to "review the
need for retention" of the stamp duties.

Mr Costello believes this requires the states to prove why they
need to keep those taxes, a case he says cannot be justified as
consumers are, in effect, being double taxed by paying GST and the
stamp duties that were earmarked to be abolished.

"The GST revenue was given to the states so they could have a
growth revenue and abolish other inefficient state taxes," he
said.

"The fact that GST revenues have been far in excess of the
original projections when the IGA was signed in 1999 means that the
abolition of these other state taxes should not be delayed, if
anything it should be brought forward.

"The big winners will be home buyers, small businesses and
consumers, all of whom will benefit from the abolition or reduction
of inefficient taxes that the state governments agreed to
abolish."

Only first home buyers in NSW now benefit from duty relief. They
do not pay duty on homes worth up to $500,000 and receive a
discount for homes worth between $500,000 and $600,000.